As global analyst 24/7 Wall St singles out the US firm as one likely to ‘disappear’ in 2013, Cosmetics Design takes a look at what happened to the company in 2012.
Each year, 24/7 Wall St. identifies important American brands that it predicts will disappear within a year, based on that company's performance in the competitive nature of certain industries.
This is the first time a cosmetics giant has featured in recent years and the analysts haven't mixed their words on summarizing why Avon took the number 10 slot in 2012; “It would be hard to find another large American company as bad off as Avon Products.”
A turbulent year
The line of events began back in January with the company announcing that its’ vice chairman Charles Cramb had been fired following on-going investigations into bribery centred on its China operations.
The internal investigations go back as far as June 2008, with efforts to establish whether or not officials at the company have violated the Foreign Corrupt Practices Act remaining ongoing.
By April, Andrea Jung announced she was stepping down as executive chairman and board member, who was then replaced by Sherilyn S. McCoy , formerly of Johnson & Johnson. The move seen some in the industry concerned as to McCoy's lack of experience in running a public corporation.
Between March and May, Coty made two unsolicited bids for the troubled giant, firstly at $10bn before upping the offer to $10.7bn, to which Avon rejected the first time claiming that its rival had ‘substantially undervalued’ it and was reported to have ‘ignored’ the second time.
Coty pulled the offer from the table two weeks later to the dismay of a number of financial analysts who felt Avon should have taken an offer that "may be as good as it gets".
In October, Avon came under the FDA's radar, who on reviewing the company’s online marketing literature, found that five different products in its' Anew range carried claims that contravened its guidelines.
By December the company was announcing that it was pulling out of the South Korea and Vietnam markets whilst planning to cut 1500 jobs worldwide as it continued to look for ways to stabilize the business at a turbulent time.
Possibility of a comeback?
Events like these are sure to knock any company regardless of how successful, but are they enough to bring down a multinational giant with more than 70 years of dominating the direct selling market? Surely there’s room for a comeback isn’t there?
Well, 24/7 Wall St reckons that Avon is in a vulnerable position in the midst of a highly competitive beauty market and management have not concentrated on its core business, but rather on other issues, making it eligible enough to disappear within 18 months.
One thing’s for sure, 2013 will be a make or break year for the troubled company.